PepsiCo Completes Agency Reductions

Mostly Smaller, Non-Omnicom Shops Among Those Eliminated

PepsiCo's North America beverage division has completed the downsizing of its agency roster, eliminating many of the smaller shops.

A spokeswoman confirmed that the beverage group is working with about 50 agencies, after letting various contracts expire. She said the moves are intended to strengthen the company's relationships with Omnicom Group, the ad-holding company with which Pepsi has long been aligned.

Various executives close to PepsiCo said the cuts were largely focused on weeding out smaller specialty shops that had been layered in over the years. Its move is counter to recent trends. Several large marketers, such as Kraft and Unilever, have increasingly entrusted smaller shops with bits and pieces of their brand portfolios.

Simon Lowden, chief marketing officer at PepsiCo's Beverages, told Ad Age in February that the number of agencies the company works with had ballooned in the past two to three years.

"It's grown because the agenda has gotten more complex and busier," Mr. Lowden said at the time. But "when we look back on things, the vast majority of the work is still done by our core agencies."

The spokeswoman identified those "core" agencies as Omnicom Group networks TBWA/Chiat/Day, BBDO and DDB, as well as Omnicom shop TracyLocke and Genesco, a sports-marketing agency with ties to TracyLocke. She added that an agency with a contract that was allowed to expire could be called on again down the road, if an opportunity arose where that agency was the right fit.

About 100 shops, or 65% of the division's partner agencies, were removed. Interpublic Group of Cos.' Huge , which did work related to the Refresh Project, for example, is no longer working with the brand. MDC Partners' Anomaly , which had been slated to handle the relaunch of Pure Leaf, a premium tea brand, stopped working with PepsiCo months ago, according to an agency spokesman.

Independent Ruder Finn is no longer working with the beverage division, though a spokesman said it continues to handle a corporate recycling initiative. One Omnicom shop that 's not benefiting from the moves is Porter Novelli. The agency, which said it has handled projects for Pepsi's nutrition group, no longer works with the beverage division.

But certain non-Omnicom shops, such as Dentsu's Firstborn, WPP's VML, Interpublic's Weber Shandwick and independent Olson PR appear to have either retained or added to their PepsiCo business. PepsiCo declined to name any of the agencies that were cut.

Calling the approach "need-based, "Mr. Lowden said the roster hadn't been pared based on a goal to have a certain number of agencies on each brand. Instead, various brand teams were told to focus on partnerships and programs aligned with business objectives.

The consolidation, announced at an investor meeting earlier this year, was billed as a bid to increase efficiency and shift into brand-building money allocated for things such as agency fees. The company has also said it would spend an extra $500 million to $600 million this year to advertise its brands, with a focus on North America.

Contributing: Alexandra Bruell, Kunur Patel

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Natalie Zmuda

Natalie Zmuda oversees the CMO Strategy section and is responsible for identifying and analyzing the latest trends impacting chief marketers. Natalie also covers the retail and non-alcoholic beverage categories. She joined Advertising Age in 2008, following five years covering the retail and fashion industries for Conde Nast Publications.